Magnus Enterprises engaged a CPA firm to prepare its annual federal income tax return. Which of the following is a true statement with respect to the CPA firm's liability to Magnus for common law negligence?
A. Such liability cannot be varied by agreement of the parties.
B. The CPA firm will be liable for any fraudulent scheme it does not detect.
C. The CPA firm will not be liable if it can show that it exercised the ordinary care and skill of a reasonable person in the conduct of his or her own affairs.
D. The CPA firm must not only exercise reasonable care in what it does but also must possess at least that degree of accounting knowledge and skill expected of a CPA.
Answer: D. The CPA firm must not only exercise reasonable care in what it does but also must possess at least that degree of accounting knowledge and skill expected of a CPA.
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